SingPost joins hand with Alibaba and the 40 thieves

In an older post (Stock: SingPost), I noted the progression of SingPost from postal services to logistics. SingPost's traditional postal business is surely on a downhill slide and will remain so.

Well, have yet to see the 40 thieves, and hopefully wouldn't see any. But, latest news abound on the announcement of the partnership with Alibaba with the later taking up a 10%+ stake in SingPost. Interestingly, this is happening even as Alibaba itself is preparing for its IPO. With SingPost increasingly looking like an e-commerce company, this partnership offers interesting prospects for growth for SingPost. It looks like SingPost as a dividend yielding stock will remain sustainable.

   

Softbank (Japan) owns a slice of Alibaba (China) while the later owns a slice of SingPost (Singapore). Interesting. Perhaps time to take a closer look at Softbank as well?

Related:
Stock: SingPost
SingPost Investor Centre

Journey through the ages - is 20% good?

It has been a fascinating, and at times exciting, journey. Initially, I had only invested in insurance-based schemes. Be it whole-life endowment plans or investment-linked policies (ILP). Work, work, work was otherwise all I focused on. Making ends meet from the salary I earned and saving money into the bank were pretty much the game plan otherwise. Marriage, housing, post-graduate studies and kids pretty much took up everything else I had.

Had it not been for the early years buying into the various ILPs, I wouldn't have much of an investment to speak of. Interestingly, I had the fortune of having taken up ILPs in the era post Asian Financial Crisis and it had generated quite a tidy sum. It came in handy when I needed the money to complement my CPF to buy my first home.

Then I discovered Fundsupermart. A small sum in its cash fund gave me confidence to take the next step - i.e. to invest into various unit trusts funds. As I read more and gained a better understanding of the concept of diversification, stocks and bonds, the unit trust funds I invested into became more systematically managed.
Then I discovered the tax benefits of the Supplementary Retirement Scheme (SRS). Voila! Max'ed out my SRS, minimise the tax I have to pay, and invest the SRS into unit trust funds at Fundsupermart. It's all too easy!

At the depth of the Global Financial meltdown, I saw my unit trust funds sink miserably. And I mean miserably. But I stayed faithful to the diversification plan with the confidence that the market will generally recover in the long run.  It has not disappointed.

In 2009, I assessed that there were many opportunities to pick up stocks. I must say I had a confirmation bias when I saw a video interview with Warren Buffet where he suggested that he was on the look out for things to buy. So started my stock picking journey.

After 5 years investing into the stock market, I did an analysis recently to see how I've faired. Turned out, not bad. Not bad at all. Using Excel's XIRR function, the internal rate of return showed 20.6% over the 5 year period investing in stocks. The stock portfolio, both from valuation uptick and from cash additions to the investment fund, has grown in leaps and bounds, from zero to hundreds of thousands in that 5 years.

Significantly, as I analysed the individual stock's performance, it is also clear that the dividends have been significant. Soon, the dividends alone would generate $1,000 per month of income. Of late, as companies try to preserve their capital, several have started offering Scrip Dividends (also known as Dividend Reinvestment) options which I have opted to subscribe to, and thereby increasing the number of shares that I owned of those companies.  I'm doing so with the assessment that these stocks are not going the way of the dodo bird over the next 5-10 years.

In many cases, the dividend yields have gone way beyond 4% compared to the original cost of the shares as many of these companies have consistently raised their dividends year on year. It sure feels *shiok* to see a stock that cost $1,000 generating an annual dividend of $100 per year and growing. Must say though, that there aren't as many SGX companies that behave like that compared to US stocks on the NYSE. The later have many more companies with a long history and consistent track records. Unfortunately, that also comes along with the 30% withholding tax.

Happy investing!

Related:
Where Lies the Portal to Wealth?
Pattern of Behaviour - A review of 2013

Travelers to the US on visa waiver programme - Electronic System for Travel Authorisation (ESTA)

Travelers from countries that are on the US visa waiver programme need to submit applications via ESTA for prior approval. An online search will throw up many websites apparently offering this service for a tidy fee. At worst, some are con jobs. At best some provide an actual flow-through application service with little value add.

Seems the official US government website is at: https://esta.cbp.dhs.gov/esta/.  One can certainly save a couple of dollars by applying online directly instead.  Self help?

Crowd Funding and Peer to Peer Loans

Crowd Funding

Crowd sourcing has developed into crowd funding in recent times. These have provided avenues for new business opportunities and innovations to thrive.

crowdbnk.com
crowdcube.com
kickstarter.com
syndicateroom.com

Peer to Peer Loans

Another interesting trend has been the appearance of Peer-to-Peer Loan services, allowing the retail investors to became a banker, providing micro-financing. There are several such services in the US and UK. Such loans are not without risk for the lender, and some bad loans are only to be expected.

fundingcircle.com
ratesetter.com
rebuildingsociety.com
zopa.com
assetzcapital.co.uk
lendingworks.co.uk

When will we see such innovations become possible in Singapore?

VICOM - what's there not to like about this company?

Car ownership such a problem in land scarce Singapore.  Especially in recent years with the high price of the infamous Certificate of Entertainment (COE).  With the stroke of a pen (or a paper) and one foots out tens of thousands of dollars before even talking about the cost of the car itself.  And thereafter, there's the cost of road tax, insurance, fuel and maintenance.  Not to forget, the car is a rapidly depreciating asset of 10 years. It's a real money sucker.  So, don't invest in the car.  Invest in something that benefits from car ownership. Who else then but VICOM?



What's there not to like about this company? Every car needs to have its periodic car inspection. It's regulated. That's a guaranteed business.

Are people going to move away from car ownership?  Naw.  Not even if the MRT lines work well and taxi drivers decide to drive under all weather, all hours.

Is VICOM well run?  A visit to VICOM would show just how few workers they need to transact each car through its inspection process.  The process is well oiled and highly automated. Keeps churning away.

Stock Data
Market Capitalization (SGD 'mil)	523.76
Common Shares Outstanding ('mil)	88.6140
52 Week High (SGD) (14/05/2014)	5.940
52 Week Low (SGD) (21/06/2013)	4.550
52 Week Return (%)	22.680
Average Volume ('mil)	0.0064
Beta	0.28

Financial strength
Current Ratio	3.49
Quick Ratio	3.48
Long Term Debt to Equity (%)	-
Total Debt to Equity (%)	-
Interest Coverage Ratio (TTM)	-
Free Cash Flow to Firm (TTM) (SGD 'mln)	21.94

Margin
Gross Margin (TTM) (%)	42.52
Operating Profit Margin (TTM) (%)	32.59
Net Profit Margin (TTM) (%)	27.84

Dividend §
Annual Dividend per share (SGD)	0.1610
Dividend Yield (TTM) (%)	2.72
Dividend Yield (Annual) (%)	2.72
Payout Ratio (TTM) (%)	68.66
3-Year Growth Rate (%)	7.67

Valuation
Historical P/E Ratio	18.38
P/E Ratio (TTM)	18.04
P/BV (latest interim)	3.81
BVPS (latest interim) (SGD)	1.5502
EPS TTM (SGD)	0.3276

DPS (SGD)	0.1180	0.1290	0.1440	0.1500	0.1610
EPS (SGD)	0.2333	0.2559	0.2865	0.2989	0.3215

[Source: POEMS]

Given the above, we can see that it has very good margins, and absolutely no debts!  

Its dividend payout has been great - currently at 2.72% and deceivingly lower, but would usually be much higher by the end of each FY.  Its dividends has been consistently climbing up from 0.118 (FY09) to 0.161 (FY13).  DPS has also maintained below EPS throughout the past 5 years. Hard to find such companies on the SGX.  Tell me if you know of others with such a characteristic.  I consider this to be one of the high yield and dividend paying stock.  

There's probably not much room for significant growth though, so don't expect heart-stopping growth. But it should remain steady.  Does anybody actually check how much they pay for each car inspection? I'm guessing probably not. Just pay! And in fact, with more than just a sense of gratitude to get a pass so that you can continue to use the car without needing further work. I could hear the expletives from the truck driver in the next lane whose car didn't.

P/E ratio perhaps a bit high right now.  But what's there not to like about this stock?  Really.

[Disclaimer: This is a not a call to buy or sell.  Merely a record of why I invested in this stock.]

Breadtalk - a case of over-expanded yeast?

Breadtalk doesn't really need much of an introduction.  BreadTalk, Toastbox, Din Tai Fung are places I patronise and these businesses are buzzing. The rest like RamenPlay, The Icing Room and such don't excite me as much. Food Republic is reasonably well patronised, dependent on locations, but operates in a very commoditised space.


The figures below show just how much it has moved over the past year alone.  It was hence time to re-examine the company

Stock Data
Market Capitalization (SGD 'mil)	396.06
Common Shares Outstanding ('mil)	281.5116
52 Week High (SGD) (07/05/2014)	1.490
52 Week Low (SGD) (11/06/2013)	0.820
52 Week Return (%)	44.850
Average Volume ('mil)	0.8867
Beta	1.32

Financial strength
Current Ratio	0.70
Quick Ratio	0.65
Long Term Debt to Equity (%)	147.11
Total Debt to Equity (%)	179.57
Interest Coverage Ratio (TTM)	45.72
Free Cash Flow to Firm (TTM) (SGD 'mln)	-36.63

Margin
Gross Margin (TTM) (%)	53.04
Operating Profit Margin (TTM) (%)	4.17
Net Profit Margin (TTM) (%)	3.01

Dividend §
Annual Dividend per share (SGD)	0.0180
Dividend Yield (TTM) (%)	1.28
Dividend Yield (Annual) (%)	1.28
Payout Ratio (TTM) (%)	37.56
3-Year Growth Rate (%)	21.64

Valuation
Historical P/E Ratio	29.16
P/E Ratio (TTM)	29.15
P/BV (latest interim)	4.21
BVPS (latest interim) (SGD)	0.3337
EPS TTM (SGD)	0.0482

[Source: POEMS]

Its debt level is horrendous at almost 180%.  The company is heavily leveraged as it seeks to expand.

Its gross margin is high at 53.01% and is reflective of its branding.  However, its net profit margin is very low at 3.01%.  Its businesses require significant material and manpower.  The later is an especially difficult problem in manpower scarce Singapore.  Given the low margin, scale probably matters to reap maximum economy of scale, and hence its drive to expand rapidly.

My sense is that it is likely over-priced right now at a P/E ratio of 29 and P/B of 4.21.  Dividend yield isn't great right now either at 1.28%.

A company with a brand name that I can recognise, but for now possibly over-priced.  Time to exercise caution.

Related:
Breadtalk Group Gunning for Growth [Singapore Stock Market News]
Breadtalk AGM 2014 by Rusmin Ang [Next Insight]

[Disclaimer. This is not a call to buy or sell. It is only a record for myself on why I bought this company and am maintaining a cautious outlook by selling down to a minimal holding at this time.]

Positive cash flow without putting any cash at risk! Too good to be true?

Saw an online video clip on YouTube recently by this lady who was selling her concept of developing wealth. She was schooled in the art of "Rich Dad, Poor Dad".  I've no grouse with the general idea of "positive cash flow" though I guess some of the concepts may run contrary to accounting practices in the way assets and liabilities are normally tagged.

She gave an example of a Singapore property and asked the audience if they would invest in it.  Essentially it had a negative cash flow due to the high loan payments compared to the rental income.  The obvious answer was no.  But she postulated, what if she had a way to turn this into positive cash flow?  I was intrigued to say the least.

The concept?

Idea #1.  Secure an interest-only loan payment.  The argument being that since this is for the purpose of generating income from rental and not for capital appreciation, taking this approach helps to reduce the loan payment and hence shifts the cash flow equation to the positive.  Not bad.

Idea #2.  Obtain a capital refinancing.  She made it clear to differentiate between refinancing a loan (which I understood) versus capital refinancing (which I had no clue about).  It sort of work like this.  Suppose you could obtain a loan of 80% against a $1,000,000 property - i.e. $800,000.  So you had to put down $200,000 as the upfront down-payment. 5 years later, the value of the property has appreciated to $1,200,000.  Recall Idea #1?  So, the loan principal has remained at $1,000,000.  But since the value of the property has now appreciated to $1,200,000, the capital refinancing would offer a revised loan at 80% giving $1,000,000.  You would therefore have extracted the $200,000 you had put down earlier!  Of course, the loan repayment would have increased.  But she argued that the rental income would likely have similarly increased as well.  Amazing isn't it?  Over 5 years, you have effectively put no cash into the investment and would still generate a positive cash flow from the rental income!  I also want!

What's the catch?

Catch #1.  Notice how the assumption in Idea #2 contradicted Idea #1.  She said we should not invest for capital appreciation but to achieve positive cash flow.  But what was the assumption in Idea #2?  Capital appreciation!

Catch #2.  What happens if the value of the property drop?  The bank is going to come calling for a cash top up!  Do you have the cash reserves to respond when that happens?  Are you still cash flow positive? Companies can die when they don't manage their cash flow properly from month to month.  For the individual, it could mean bankruptcy and a miserable rest-of-the-life.

Catch #3.  Does the economy remain healthy always and you can be assured of the rental income?  More often than not, when things are getting bad, it just gets worse. The very scenario in Catch #2 is also likely to be accompanied by a poor economy. What happens?  Your rental would also go up in smoke.  Now the ability to service the loan has just been compounded by an amount equal to the lost rental income!  Double whammy!

Speaking of which, got a call from a friend (person A) recently, asking for the number of another guy I know (person B).  A was trying to get in touch with B over his investment.  Seems A had invested in some gold-related scheme with B.  I happened to know B had been scammed by his business partner (absconded!) and was desperately trying to get his life back.  B was now driving a taxi to make ends meet.  I guess friend A has to kiss his investment goodbye.  Sad.

Saving more for tomorrow

This video from TED talk provides an interesting elaboration of behavioural finance:

Saving for Tomorrow (TED Talks).

Instant Gratification:
Take the banana or the chocolate?

Inertia:

Opt out or opt in? Which gives you a better outcome? Depends on what you wanted in the first place! Both give you the sense that you have a choice. But with very different outcomes.

Loss aversion:

Give a monkey an apple and he's happy. Give a monkey two apples and then you take one away, he's pretty upset.

Watch the video to understand the above examples.

How a penny made me feel like a millionaire

What's a penny worth?

Feels like a millionaire in some circumstances. It's such a contrast when our upbringings gave us such contrasting experiences.

What does it take to make us feel the sense of "satisfaction"? Between the $5 cup of gourmet coffee and the $1 cuppa at the friendly neighbourhood coffeeshop, is there sufficient marginal utility to want pay that $4 difference? Not to mention the difference of 300+ calories (kcal) involved!

Sometimes, there is.  To each his own. Enjoy your cuppa! *slurp*

China Minzhong

Once again, the short sellers have targeted a company listed on the SGX. China Minzhong lost almost half its value today after the report was published. A trading halt was called on the SGX. The allegations suggested that China Minzhong had cooked up their sales to their supposed top two customers. The accusations if true would suggest a pretty unethical (and likely illegal) cooking of the books to make their sales look good.

It's interesting that up till recently, several brokers were making the call to buy this stock. I must say that I have been watching this and another S-Chip (Sino Grandness) for some time but have not yet found the reason to invest into either. I have been looking for a good food company to invest in ever since Hsu Fu Chi was taken private.

At various forums, some posters were lamenting that they had invested a significant chunk of their money into this company. Strange why they have not learnt from Lehman Brothers, Mini-bonds, and various misadventures of S-Chips? Some even went on to say that they vested in today before the trading halt as they felt that even if the two top customers were negated, the impact would not be significant.

Who knows if they might be right? But it's a no go by my books - definitely an OB marker! When the management cannot be trusted to be doing the right thing, it is no longer a company I would want to own any part of. History has shown time and again that things would not come to a good ending. Consider Enron and others like it that have gone the way of the dodo bird. Other indicative signs (though not necessarily a show-stopper) - absence of any dividends, high PE ratio.

Consult your stock broker

Totally Useless Advice #1

Was watching an episode related to investment recently, and came across a most useless piece of information.  The question posed was on what stock to pick at this point in time (in the Singapore market).  The advise was to refer to a stock broker.  What crap! 

Totally Useless Advice #2

Then there was another question regarding generating income from stocks.  The reply was to buy blue chip stocks to get good dividend income stream.  Rubbish once again!

Totally Useless Advice #3

And here's another one: How should one go about building a retirement income.  The answer: buy annuities.  No prize for guessing the occupation of the lady giving this piece of advice.

Can we have a better show please!?  We're getting horrendous investment advice from TV.  Had a more positive impression from past episodes.  But this one really irritated the heck out of me. 

[Venting]

Annuity Plans for Recurring Retirement Income

Annuity plans offered by various insurance companies:

http://www.income.com.sg/insurance/Annuity/index.asp
http://www.aia.com.sg/en/individuals/pro..._plan.html
http://www.aviva.com.sg/retirement/for-i...ement.html
http://www.axalife.com.sg/retirement/retire-happy

An alternative approach to provide a regular income stream during retirement.  This could be used to augment (a) payout from CPF Life, (b) dividend income stream from stocks, and (c) coupon payouts from bonds.

Acknowledgment: Information was sourced from a post at ValueBuddies.

Cost of Car Ownership

Here's an interesting website that offers a calculator to compute the cost of owning a car in Singapore: Cost of Car Ownership.

With the price of a Certificate of Entitlement outstripping the base value of a car, it has become one of two major cost of living topic that is a regular conversational piece for taxi drivers. 

The other is of course housing.

Nest Eggs for Education Funds

Years ago, my wife set up a savings account for each of our child.  Contributing $50 a month for several (many!) years, these eventually reach a few thousand dollars.  But with the rapidly depleting interest rates at the banks, we finally decided that it wasn't the most optimal approach.

Reviewing the longer term plans, we decided to build these towards their respective tertiary education funds, should they succeed academically.  We then revised the monthly contributing to $500 a month by investing in a basket for unit trust funds (aggressive portfolio diversified across several regional funds - US, Europe, GEM, Asia ex-Pac).  With the increased earning power, this was viable and sustainable in recent years.  Through this, the respective funds have rapidly built up to $50,000 each through a combination of monthly contributions and growth in valuation.

Looking forward, I have shifted towards $600 a month contribution towards a portfolio of conservative money market and short duration bond funds.  Coupled with additional top-ups following each Chinese New Year and other miscellenous, it should lead to a nett contribution of about $8,000 a year.  In 4 years, when they would be of age for university, the respective nest eggs would have reached $80,000, an average of $20,000 for each of the 4 years at the university.  A sum that wouldn't be enough for an overseas education, though it would be a big leg up regardless.  More importantly, it should be adequate for local studies.

Looks like they are set.

Kian Ann exits SGX

And so exits Kian Ann:

http://www.kianann.com.sg/archives/announcements/20130201_00056.pdf

Pattern of Behavior - A Review for 2013

I was reviewing a past musing I made in 2011 (Pattern of Behaviour) of several interesting companies that I was invested in and monitoring. 

Since then, Adampak, Cerebos, Hsu Fu Chi, Kian Ann all went through one form of general offer or another, and have since delisted from SGX.  Guess my bets were on the righthorses.  The original buys centered around these stocks that paid good and steady dividends.  In some cases, they had low Price-to-Earnings (PE < 15) and/or low Price-to-Book (P/B < 1.0) ratios.

More recently, I divested Innotek.  Seems like a dead horse.  But I may well have divested at its trough (pun).

Of the rest, most are still struggling at the fringe, especially M1, CSE Global, SingPost and Sing Inv & Fin.  SingPost in particular faces the challenge of diversifying itself from being overly dependent on a gradually declining domestic market.  Consequently, it has been taking on an aggressive M&A track.  However, these have yet to pan out.  It's all about execution.  For the rest, I remain optimistic for the longer term.

Of the balance, Teckwah and Zagro Asia have been doing well.

In nett therefore, out of 12 stocks, 4 exited profitably, 1 exited at a loss, holding 4 that are performing neutral, and holding 2 that are doing well - i.e. 6 wins, 4 draws, 1 loss.  Not too bad.

Dividend Growth Stocks

For the past few years, I've been taking the approach of looking for value stocks on SGX with good dividend yield.  The strategy seems to have worked well so far.  Of late, I started examining the dividend growth history of various stocks and it seems that there are a few that stand out significantly:

- The Hour Glass
- VICOM

Interestingly, their dividend payouts in absolute dollars have been consistently rising (dividend per share), supported by increasing earnings (earnings per share).  I view with some optimism that Breadtalk may in time fall into this class as well.

Examining the NYSE, there seem to be even more options.  These include:

- McDonalds
- Yum!  (KFC)
- Coca Cola
- PepsiCo
- Johnson & Johnson [EPS is less consistent]
- Clorox
- Kimberly-Clark

These are all familiar brands with significant global presence.  All appear to have been growing steadily over many years.  Fastfood, drinks and toiletries -   essentials in both good times and bad?


Looks like good stocks to hold onto for a lifetime of consistent and growing dividend payout?  Sounds like a plan!

Condo, wife, kids and a taxi

Earlier this evening, I hopped onto a cab home as I typical do each evening.  I had a fascinating ride in the Mercedes Cab and an even more engaging conversation with the taxi driver.  He seemed young and educated.  He did not look like the typical taxi driver. 

He was a chatty fellow and volunteered that his wife was a housewife and he had three kids to feed.  I congratulated him for achieving above the national benchmark. 

Fascinatingly, he was working as a Senior Engineer in an electronics manufacturing company on weekdays. Driving the taxi was his weekend job.  It seemed like he already had a well paying job as a professional engineer.  Why then was he driving a taxi?  I've heard of professionals who had lost their jobs in times of poor economic conditions and turned to taxi driving as a last resort.  But this certainly wasn't the case here.

To my further surprise, he said he was living in a condo.  Now highly curious, I asked him why he was driving a cab given that he was living in a condo and was a professional engineer?  To which, he said, "That's precisely the reason!". 

Apparently, in order to meet the lifestyle demand of a singe income family, a condo (someplace at Marine Parade) and a family of four dependents, he was working weekdays as a professional engineer.  The taxi income was to supplement his regular salary.  He drove on Fridays and Saturdays nights.  As an added benefit, he then had the Mercedes for his family weekend activities on Sundays.  Not bad.

It must be tough living such a busy lifestyle working six days a week to sustain the lifestyle that he had.  But it was apparently one he had come to terms with.  He seemed jovial and happy.

He had an interesting view on economics too.  He said that ever since the two Integrated Resorts opened, taxi business had picked up significantly.  Elaborating, he said that Singapore used to receive about 7 million visitors a year.  But eversince the Integrated Resorts opened for operations, the number of tourists had increased to 10 million a year.  Therefore, the demand for taxis had similar increased.  Taxi drivers were therefore earning 50% more than they used to.  It was quite a eureka moment for me.

I thought I already had enough surprises from this interesting gentleman.  But there was more.  When asked how much he could make as a two-nights-a-week taxi driver, he shared that he was making an average of $500 per weekend.  And that was after deducting all his taxi operating expenses!  He was making an additional $2,000 a month just driving about eight nights. 

Fascinating insights from a taxi ride.  What a wonderful Friday!  I hope you have the opportunity of meeting this jovial Mercedes taxi driver one day too.

Delisting of Cerebos

More bad news as far as I'm concerned.  First it was Meiban.  Then it was Adampak.  Now, it's Cerebos.  Sigh.  While in all cases I have or will be making a tidy profit from the delisting offer that were way above what I paid for these shares, I am in no way celebrating. 

Each of these companies have been giving out consistent dividends and I have benefited from these passive income (which were re-invested).  So I have benefiited both ways in terms of appreciation and dividend income.

They have been consistent sources of regular income that I am going to miss.  The loss opportunity of the future income stream is going to be sorely missed.  Au revoir!

Insinc with the times

Here's a great money saving deal which is a no brainer for all who travel on the MRT on weekdays prior to peak hours:  Go sign up at http://www.insinc.com/ and participate in their decongestion programme. 

You can take the MRT anytime as you wish, but you would receive more credits when taking the MRT during the pre-congestion hours.  These credits can then be 'spun' for possible rewards.  It's a snake-and-ladder game that generates prizes if you land on some lucky spots.

Thus far, I've received prizes ranging from $1 to $50 in the past few months which I've redeemed from AXS machines to credit into my MRT card.

Have fun decongesting, and learn about the carbon footprint avoidance you're also contributing to as well.

Gentings Perpetual Subordinated Capital Securities @ 5.125% + 1% (after 2022)

Ah, finally, another opportunity! 

Gentings is offering Perpetual Bonds at a rate of 5.125%.  After 10 years (18 Oct 2022), if not redeemed, the rate increases to 6.125% thereafter.  The perpetual bond is recallable/reedemable in 2017 (5 years).  Minimum subscription to its IPO is $5,000, and in increments of $1,000.  Distribution is twice yearly on 18 Apr and 18 Oct.

There are many risks involved and one should check out the prospectus in detail.  From my perspective, it sounds like a reasonable deal, so long as Gentings doesn't fold over the next 20 years.  Would have been even better if the rates were higher!  One can only wish.

Capita Mall Asia Bonds (5 + 5 years)

Capita Mall Asia (CMA) is first off the block, offering a 10-year bond for the first 5 years at an interest rate of 3.8%, with pay outs on 12 Jan and 12 Jul each year, and callable in part or in full after 12 Jan 2017.  If not called, the interest will increase to 4.5% for the next 5 years, maturing on 12 Jan 2022.

Applications are open from 3 Jan 2012, 2 pm to 9 Jan 2012, 2 pm, at a minimum of $2,000 and in increments of $1,000.

Not eligible under CPF Investment Scheme and Supplementary Retirement Scheme.

Details at SGX Website

A Year of Retail Bonds and Preference Shares

It's 1 Jan 2012, and morphing shortly to the Year of the Dragon.

News seem to suggest that there will be a sprinkling of companies raising funds through Retail Bonds and perhaps Preference Shares.  Chances are good as credits are likely to be tight.  So this is one avenue for companies to secure credit.  Hopefully, these will be priced at more exciting levels, offering above 4% annual pay out?

I keep seeing comparisons that people make between the yield of REITs, comparing against bond coupon rates, and similarly, preference shares.  However, there is a big difference involved concerning the principal amount.  In the case of REITs, the yield is dependent on the current stock value of the REIT, so it will fluctuate.  In contrast, the coupon and dividend payment of bonds and preference shares are based on the original face value (or par value) and is not dependent on the trading value of the bond/preference-shares.

To illustrate, if the REIT was priced at $1.00 per share, a 5% dividend  would give $0.05 per share.  In the following year, if the REIT collapses to $0.50 per share, a 5% dividend would give only $0.025 per share.  For the REIT to continue giving out the same amount of $0.05 per share, it would have to pay out a dividend of 10%.  Whether the later is possible depends on its business revenue generated.

In contrast, a bond would be priced at $1.00 per unit.  If it has a 5% coupon payout, one gets $0.05 per unit every year until maturity, where the bond is then redeemed by the issuer at the original capital of $1.00 per unit.  The coupon payout does not fluctuate.  On the secondary trading market, the bond would be trading at values, and that does fluctuate.  But that does not affect the coupon payout.  It only has an impact if one needs to sell it off before maturity.

It is similar for preference shares.  For non-cumulative preference shares, the difference would be that there may be no payout if the underlying stock does not as well.  So it's important that such companies are well managed and have a consistent history of always paying out.  In the case of cumulative preference shares, any payout missed in one year gets carried over to the next - i.e. cumulative.  Some of the preference shares are "perpetual", and may never be redeemed.
[SGX List of Preference Shares]

The Toto special for New Year is estimated at $3 million.  If one was to win this sum, and invest the winnings in a series of bonds and preference shares (diversification!) that gives an average of 4% coupon/dividends, that's $120,000 per year perpetually!  Not bad. 

One can dream.  Buy a ticket today for that HOPE - a four letter word. 

Disclaimer: Winning is not guaranteed. *grin*  Happy New Year 2012!

Non Convertible Preference Shares III

[This is an update of a previous post.]

Traded on the SGX, NCPS are traded like shares (which means the bid-ask price fluctuates), but gives out dividend/coupon payments like bonds.  There aren't that many such NCPS, and they're most likely from the 3 big banks in Singapore. So long as the issuers don't call back their NCPS, they will continue to pay out the dividends at the stated rate.  However, some of these have 'maturity' dates where the coupon rate reverts to a floating rate thereafter.  Prior to the maturity date, the bank cannot call back the NCPS.

The risk of failure stems from the issuing company going down under (you lose your pants!), or when it fails to pay out any dividends for their standard shares resulting in no dividend payout for their NCPS as well. However, the likelihood of these negative events appear slim given the strong historical performance of these Singapore banks.  But then again, we've seen also big banks in the US going down under in recent history!

If one is not worried about the fluctuations of the "capital", and is happy with the dividend/coupon payout, NCPS may not be a bad option for building a "cashflow" stream.  So long as the issuer doesn't call back the NCPS, you will get the annual payout (usually half-yearly or quarterly) perpetually.  If they do call back the NCPS, you will get back the par value anyway.

Below are the respective NCPS.  Read as such:
[NCPS]
[Date of maturity] @ [Rate] ([Dividend/Coupon payout date])

Hyflux 6.0% - Cumulative NCPS

- 25 Apr 2018 @ 6% (25 Apr, 25 Oct)

- Thereafter @ 8% (25 Apr, 25 Oct)

DBS 4.7%
- 22 Nov 2020 @ 4.7% (22 May, 22 Nov)
- Thereafter @ 3-mth SOR + 2.28% (15 Feb, 15 May, 15 Aug, 15 Nov)

UOB 5.05%
- 15 Sep 2013 @ 5.05% (15 Mar, 15 Sep)
- 15 Sep 2018 @ as above [2nd maturity date]

OCC 5.1%
- 20 Sep 2018 @ 5.1% (20 Mar, 20 Sep)
- Thereafter @ 3-mth SOR + 2.5% (20 Mar, 20 Jun, 20 Sep, 20 Dec)

OCC 3.93%
- 20 Mar 2015 @ 3.93% (20 Mar, 20 Sep)
- Thereafter @ 3-mth SOR + 1.85% (20 Mar, 20 Jun, 20 Sep, 20 Dec)

OCBC 5.1%
- 29 Mar 2013 @ 5.1% (20 Jun, 20 Dec)

OCBC 4.5%
- 28 Jan 2013 @ 4.5% (20 Jun, 20 Dec)

OCBC 4.2%
- 14 Jan 2013 @ 4.2% (20 Jun, 20 Dec)

SOR refers to the Swap Offer Rate.

For an elaboration to understand about these preference shares, you may want to examine this talk on Comparing Bonds from an SIAS MyMoney investor education programme.

For the latest, refer to SGX List of Preference Shares.

You may also be interested in SGX List of Retail Bonds.  As an example, "LTA n4.17% 160510" means that the bond issuer is LTA at a coupon rate of 4.17% per annum and matures on 10 May 2016.

Recollections of 'my' companies

It's the eve of X'mas 2011, and it's a good a time as any to take stock of events in the year that relates to companies I've taken a stake in.  It's been a horrible and unforgiving year - tsunami in Japan, massive floods in Thailand and Australia, financial crisis Part II in Europe, SMRT coming out like a disaster movie, repeated floods at various parts of Singapore, and the bird flu apparently making a come back in Hong Kong.

Adampak had one of its factory underwater in Thailand when the floods hit. 

Qian Hu is still fishing around and doing poorly this year after the European market tanked.  Fishy.

SPH failed to deliver my papers on a few occasions.  Not getting their basic service done is a bad sign.  And the long time Chairman of SPH has become the President of the Republic.

In contrast, SingPost has consistently delivered my posts.  But the amount of junk mails these days is simply amazing!  But if it keeps the postman busy, it's good?

Singtel phone bills continue to increase throughout the year as the number of handphones I owned have gone up.  How many handphones does one need?  I am still not subscribing to any M1 services.  What will LTE technology bring to their businesses?  More data traffic is the way to go, ever since the rise of the iPhone and iPad.  Long live Steve Jobs!

Still haven't bought anything from Aussino.  I think I'm still happy with my bedsheets.  The trouble is that these things can last quite a while.  I'm not hopeful about their business.

HourGlass appears to be doing decent business.  Lots of tourists visiting Singapore these days and hopefully there're there in the branded class that the newly rich patronise.

SMB United is in the midst of a takeover bid.  Remains to be seen what the outcome will be.

Global Logistics Properties has dived in on the Japanese property market in the months following the Japanese tsunami and nuclear disasters.  Looks like some smart moves.  It's going to be sometime before we see these pan out.  China and Japan are all about exports and emergent consumption.  And that means there is a logistics battle to be won.

On the property front, the cooling measures seem to be gradually taking effect.  Amazingly, the E-Condo I'm living in now appears to be going at twice the price I bought, and that was just 5 years ago.  In land scarce Singapore, this is one area where there is no room for abundance, unless technology breakthroughs bring new opportunities.  I'd stay away speculating the home properties given that these will likely continue to attract frequent policy interventions.  This is one unstable "C" among the infamous 5Cs.  But Capita-Commercial Trust and Mapletree Industrial Trust are alternatives in the commercial and industrial sectors (REITS) for a 'stable' income stream.  That's not a bad thing.

Singapore banks have stood the test of the last two rounds of financial crisis in the US and Europe.  OCBC remains healthy and I'm sure their OCC 3.93% NCPS will continue to pay out annually.  How does the future hold for SP Reinsurance and Sing Inv & Finance?  I'm living off their dividends.

Water is the business for Hyflux.  However, I certainly wouldn't hold my breadth on Hyflux itself. It had banked on the rich African market which was unfortunately aborted by the Arab Spring.  Perhaps the opportunity will present itself again.  It has tried to diversify into China and we shall see how that transpires.  But their overall business in water and waste should remain viable and hence Hyflux 6% CPS should remain ok for the steady income stream it produces.  We need to drink, and we certainly have to shit.  One can die from not being able to do either you know.

CSE Global seems to be having trouble making profits out of their software projects.  It didn't help to find their customers caught amidst the rising tide of the Arab Spring as well.

Ah China!  Who knows where things will go from here.  One can certainly see the throngs of newly rich everywhere.  And I mean everywhere.  So perhaps it's healthy to benefit from their retail growth story via Capita Retail China Trust.

Tat Hong's factory near my neighbourhood seems to have either moved, or else all their cranes have been rented.  Bad sign, good sign, depending which way it went. But they're likely benefiting from their business down in Australia.  It's a reconstruction and recovery story after the floods in Australia had receded.

When economic woes abound, and the price of oil climbs to ridiculous levels, airlines businesses are all downhill, including filings for Chapter 11 (US)!  But I believe SIA will recover and will do well again when things pick up.  But one wonders how the new management team is fairing? 

By a similar thread, SATS' future rests on the recovery of the air transportation business.  They have just secured a contract to operate the new Cruise passenger terminal.  That could perhaps help broaden their business to the sea business.  In any case, they continue to have the stable business of providing food for the SAF.  National Service is good for SATS.

Speaking of food, Brands products from CerebosPac is a must have booster for kids preparing for exams.  What a year of exams!  That's a lot of Brands Essence of Chicken.  It also appears to be one of those staple items for hospitalisation gifts as well.  Students and hospitals, it's all about people!

Kian Ann, Innotek, Teck Wah and Meiban Gp?  Waiting for the manufacturing and engineering to recover perhaps.

With Certificate of Entitlements rising to epic proportion, car ownership has become another that has gone beyond-the-line-of-sight "C" for followers of the 5Cs.  But they all need to go for annual inspections, and the number of cars aren't getting any less despite this.  VICOM for next buy?

Merry X'mas!

Savings is all relative

I've been giving my two school-going kids their weekly allowances.  My older boy who is in secondary school is given $20 a week.  My younger daughter who has reached the end of primary school is given $3 a week. Yet, the boy has practically no savings, every cent is spent.  My girl on the other hand has a net savings of more than $500 (inclusive rewards, and birthday ang pows).  Interesting isn't it?

One could argue that a secondary school student needs to spend more money than a primary school.  Perhaps the canteen food is more expensive.  Perhaps there is greater peer pressure to hang out and chill out.  Perhaps there are more CCA activities in the afternoons and hence the corresponding expenses.  But I suspect it's a question of being a "saver" versus a "spender"?

One interesting indicator is that whenever my son gets his allowance, he tends to spend big on the first few days of the week.  Instant gratification, and consequences be damned!  He can rapidly run out of cash before the end of the work and struggles to live on the balance for the rest of the week.

My daughter on the other hand has yet to exhibit these same behaviour.  So there is hope yet.  We shall see how things pan out next year when she is also in a secondary school.

Detroit, Automotive Capital of the World

2008 was a watershed year for many in the automotive industry. No less so than the BIG-3 which are headquartered in Detroit, Michigan. 

General Motors

Along the expanse of Woodward Avenue, Detroit celebrates an annual event in the month of August each year which sees cars from the 60's and 70's gathering along Woordward Avenue for an annual drive-by (see Woodward Dream Cruise).  I hear that Woodward Avenue is much like Route-66 and a nostalgic piligrimage for automotive lovers.  It is quite a sight to see the many oldies, both vintage cars and drivers alike during the week of the Woodward Dream Cruise!

Woodward Dream Cruise 2011

While it seems that the automotive industry is very much alive along the fringe of Detroit city, it seems that Detroit city itself may have seen better days.  A fate similarly shared by its basketball team, the Detroit Pistons. Many dilipidated buildings abound, even within the heart of the city.  For a city of its size, it seems awefully quiet, even on a typical weekday.  Apparently, the city once hosted a population of 2 million.  Today, it stands at a scant 750,000.  Many have chosen to move out to the suburbs, where new housings are a-plenty.  Perhaps the only times when the city thrives is when baseball or football games are on.

Vacant buildings in the heart of Detroit

Still, there are positive signs that the city is slowly, very slowly, recovering.  The automotive industry continues to dominate its industry, and hence its economic weakness.  GM, Ford and Chrysler, as well as many ancillary businesses continue to recover and perhaps prosper.

A very simple lesson here: diversify.

August Does Not Augur Well - US Market

Yet another August and a tumultous one yet again.  The market seems to have taken a little breather from the news that the US government wasn't going insolvent, and then decided that it still wasn't happy.  Or, there were enough insider news going on that S&P was going to downgrade the US's AAA rating downwards, and the market responded pre-emptively with the inside news.  Whatever it was, the rapid drop across the board and its subsequent "hut'chew" effect has caused yet another series of contagious effect.

Is this yet another once-in-three year opportunity for a Great Global Sale?  It may not be a market bottom, but I certainly view this as another fascinating buy opportunity.

The Moneytree and its many branches

Since I strive to make it a point that my monthly expenses stay below my monthly take home pay, bonus is then an affair of choices.  What should I do with my bonus?  It seems the competing demands are a plenty:

1. Contribute to my spouse's CPF-SA account (up to $7,000) and benefit from income tax benefits and 4% returns.

2. Contribute to my spouse's CPF-MA account since it is below the threshold, and benefit from 4% returns.

3. Contribute to my kids' Fundsupermart accounts and build up their unit trust portfolio for their education funds.

4. Pay down my mortgage (2.6% loan interest) and reduce the monthly instalment payment to build up my CPF-OA (gaining 2.5% interest).

5. Contribute to my own unit trust portfolio or in my trading account to buy more good dividend paying stocks. 6-10% returns with associated higher risks.

6. Save up and keep in a Money Market Fund for vacation expenses.

7. Leave it the bank savings account, earning peanuts, but with ready cash-on-hand as part of my contingency funds.

The answer is likely a combination of above - probably 1, 3, 5, 6 and 7. 

It doesn't make immediate sense right now to do 4 since interest rates are still low. 

I guess I will not go for 2 either, unless I've maxed out my spouse's CPF-SA and there is no better place to make more than 4% returns.

Related:
Free "e-book": Achieving level one financial security for Singaporeans [ASSI]

Cashflow - A Tale of Stable Income

Heard from a colleague over lunch. 

He apparently bought a pair of properties for investment previously, paying down only 20% and secured loans for the rest.  The servicing of the loans were offset by his rental income from each of his two properties.  His tenants were all expatriate and paying tidy rentals for his properties which were located in the outskirts of the city area. 

Nice cash flow - using other's people money to make money.  Well done! Proud owner of several properties.

One day, one of his tenants called him to say he was being laid off, and he would not be able to continue paying his rent.  My friend got pretty worried, because he would have to pay a hefty monthly sum to service his loan without a paying tenant.  So he agreed to let his tenant tide over by lowering the rent, and allowed him to temporarily delay payments, hoping desperately that his tenant would be able to secure an alternate job soon.

About this time, his other tenant tried to call him on his mobile.  As he described it, "I was running scared!  I didn't want to answer his call.  Because if he was going to tell me that he had also been laid off, I didn't know what I was going to do!"

This was in the late 90's. More than 10 years later, he's apparently in a similar state.  He's starting to get worried again and is seriously thinking of getting rid of one of his properties.